For this reason, companies are increasingly looking abroad. Cross-border hiring of CFOs and treasurers "is at the highest level I've seen in 13 years," Egon Zehnder's Boyle says. "Cross-border hiring is difficult, but global companies [can't afford not to] look globally for the best talent."

Private equity wants no less, of course, but these investors can offer potential candidates something public companies cannot: a substantial equity stake and freedom from at least some regulation. "It's not unusual in a private equity portfolio company for a CEO and CFO to split as much as 5% of the equity," reports Allen Geller, managing director of Raines International, a New York-based executive search firm. "If they're successful and turn the company around and sell it to the public or another private equity group at a high price, the CEO may get $10 million to $15 million, the CFO $3 million to $5 million [based on that stake]. But they'll have small offices and maybe share a secretary. These private equity firms are expected to run lean."

Private equity enterprises embody the risk-reward equation, says John Elliott, dean of Baruch College's Zicklin School of Business. "They will more boldly link compensation to the success or failure of the venture, so they will appeal to people with an appetite for risk," he notes. And strangely enough, this indisputable connection to performance actually makes the largesse of private equity more palatable to public company investors. At the end of the day, regardless of myriad shareholder proposals for say-on-pay packages, it boils down to performance, the experts say. As long as everyone is enjoying the fruits of success or tasting the bitterness of failure, most investors are willing to live with almost any level of compensation. "We've seen this," says Boyle. "The only time someone is taken to the woodshed over pay is when the performance is not there."

The tools of compensation have also been changing. Getting a restricted stock grant instead of a quantity of stock options is becoming a fact of life that most CFOs and treasurers accept–and in fact appreciate. "CFOs and treasurers were never big fans of stock options anyway," reports Kevin Ford, senior client partner at Korn Ferry International. "They are financially sophisticated enough to understand that the potentially explosive wealth contained in stock options was largely illusory."

Still, restricted stock grants usually involve fewer shares than the options programs they replace, points out Kevin Connelly, chairman of the executive search firm Spencer Stuart. "So yes, grants are worth something even if the share price declines, while options normally would be worthless," he says. "However, if the company substantially outperforms expectations, options would probably make the exec richer than the stock grants." This is where, in the race for talent, private equity can best public company bids.

To be fair, not everyone buys the short supply scenario. "There are plenty of good candidates outside the Fortune 500 and with different titles," argues Charles Elson, the Willard professor of coporate governance at the University of Delaware. "What keeps compensation high is the fact that companies pay attention to what everyone else is doing and then always want to be in the fifty-first percentile on pay. The supply issue is a gross exaggeration that has created an artificial labor market."

Elson suggests that the secret to keeping compensation down is to truly tie it to performance–but performance that is related to an executive's actions as a manager. "If performance is good because commodity prices fell–something the executive has no control over–why should that be rewarded?" he asks. "A loose line on pay happens when board compensation committees must not simply focus on the result," he adds. In fact, some public company leaders in compensation are getting more sophisticated in how they tie compensation to performance, especially for CFOs and treasurers, Korn Ferry's Ford notes."They're getting rewarded for hitting more specific targets," he reports. That includes metrics like return on invested capital and cash flow.

"They're going beyond time-based vesting to performance-based vesting for stock grants," reports Jan Koors, managing director at Pearl Meyer & Partners. Some industries tie stock grant vesting to industry-specific performance metrics, she notes, like same-store comparisons for retail, R&D results for pharmaceuticals and on-time launches for tech firms.

The linkage of risk and reward drives the executive comp market. So, not surprisingly, growing rewards also reflect rising risk. Boards are moving more quickly to replace a CFO at the first whiff of trouble. "When things go wrong, they start at the top," Ford notes. "When a CEO leaves, the CFO is likely to follow. It's standard practice when a company reports serious performance or accounting issues for both to be replaced."

Consequently, public companies put a high premium on CFOs with solid credentials in accounting and control, which can easily dominate many CFO searches, Connelly agrees. "When auditors take a hard line on accounting issues, it helps if the company has a CFO who can engage them in a peer-level discussion," he says. "We see a much greater emphasis on technical accounting skills in a CFO." Without a CFO with accounting and control skills, a company may need a chief accounting officer position.

2007 Compensation Tables